Getting O&P Companies Up and Running after Katrina: Why Does the Insurance Response Seem So Slow?

"Many of you are seeing in the national media that things are getting back to normal in New Orleans and surrounding parishes. Nothing could be further from the truth...my in-laws' old home is now only a slab and a few bricks.... FEMA trailers are beginning to dot the landscape, but most are still not hooked up for use...a grayish-brown line marks the water height just below the roof of our old home. That water sat in the house for nearly three weeks. What could be saved after that?... As we drove to the Lake View area...we passed an old friend's restaurant. The sign for the inspection of bodies here had to be placed on the roof of his building since the water was so deep.... Thousands of homes in this area are beginning to crumble." This heart-wrenching account was posted on the OANDP-L listserve by Rick Parr, CPO, FAAOP, owner of Parr Prosthetics Labs Inc., Slidell, Louisiana. A post from Dawn Hill, BOCO, CPed, of J.J. Hill Brace and Limb Co., Gulfport, Mississippi, echoed his account. "People keep asking us if things are being rebuilt yet, and the answer is that things are just starting to get cleaned up. The coastline from Waveland to Pascagoula is totally flattened for blocks...they are still finding bodies under debris...Our business of 51 years was destroyed in Katrina, and although we are rebuilding, we won't be open for another three months still. That's three more months of no salary...Although spirits are down, we are hopeful. We are very appreciative of all those who have extended a helping hand in this time of crisis." The O&P community has responded overwhelmingly to help fellow business owners, professionals, and patients. For instance, offers of help poured into the online " Hurricane Response: O&P Communications Center (OPCC)" set up to link those needing help with those offering assistance. Help included employment offers for displaced professionals, offers of facility and office space, assistance for patients of displaced practitioners, and offers of products, equipment, and supplies. The online center was sponsored by the American Academy of Orthotists and Prosthetists (the Academy), the American Orthotic & Prosthetic Association (AOPA), and the American Board for Certification in Orthotics and Prosthetics (ABC). The site also could be accessed from the Amputee Coalition of America (ACA) website and oandp.com No Quick Fixes But as the above descriptions of the devastation still remaining as of press time show, there are no quick fixes. Heeding the wake-up call, advice now abounds on preparing companies for catastrophes. For instance, there are workshops and seminars, such as the Academy's planned workshop on "Preparing Your Company for Disaster" at its Annual Meeting March 14, magazine articles (including in The O&P EDGE ), and advice on restoring equipment and repairing other flood damage on AOPA's online " Hot Issues in O&P ." Getting Insurance Claims Paid Some O&P facility owners have said that they have had difficulty in getting insurance claims paid related to Hurricane Katrina. Of course, O&P business owners are insured by several different companies. However, to understand the overall insurance situation regarding O&P and insurance coverage related to hurricane losses, The O&P EDGE spoke with representatives of two companies which specialize in O&P services. They are Jim Graff, vice president, JLT Services, and his colleague Jim Schmidt; and Jeff Michalenok, president, Cailor Fleming Insurance. Both Graff and Michalenok noted that relatively few of their clients were impacted by Katrina, and that even then, the damage was not as catastrophic as it could have been. Claims Adjustment Can Be Complex Insurance coverage can be complex in any case, and in big area-wide disasters such as Katrina, it can become more so. Package insurance policies for business owners generally do not include flood insurance; separate coverage is needed for this, and if a business is located in a flood zone, flood insurance can be obtained only through the federal government's National Flood Insurance Program (NFIP). Thus, in a situation involving both storm damage and flooding, a question for claims adjusters is: what damage is attributable to the storm, i.e., structural damage and broken windows from high winds, falling branches, etc.--and what is due to flooding. For instance, if hurricane winds topple a huge tree over your building, collapsing the roof, and rainwater pours in, insurance would cover it. But water being pushed up the street from a storm surge is considered "flood" and is not covered. The claims adjusting process can be very complicated, Schmidt pointed out. He stressed, "No two claims are ever alike. What the person across the street got doesn't mean you are going to get the same amount. Your damage could be entirely flood-driven, while in his case, the roof blew off first, and the damage was caused by wind coming through the roof. So he may get coverage and you may not." Schmidt noted the complexity of the adjusting process is compounded by New Orleans and parts of Mississippi being below sea level. Determining Income Loss Even more complex are business income loss claims. Explained Michalenok, "Business income losses are probably one of the most difficult claims to adjust because they become more of an accounting type of loss than anything else. The insured is required to provide a snapshot of the business for that period of time, so that the forensic adjuster can see what they were doing in the same quarter of last year. It would then be reasonable to figure that they would be doing the same amount of business this year. So there is a lot of documentation that needs to be done." Noting that physical damage is much easier to assess and adjust than loss of business income and related areas, Graff agreed that documentation is vital. "You're going to be looking at historical information; there are going to be accountants sitting down and comparing notes. The insured needs to know clearly what the policy covers relative to gross and net income loss, so there is not an unrealistic expectation on how much of this will be covered." Business income losses sometimes take months, or even years, to finalize, he added. "For instance, a friend who is an attorney told me that he was still adjusting and involved in final settlements for claims going back to damage from Hurricane Ivan in September 2004." In widespread catastrophic events, insurance coverage may differ somewhat, as compared to a single event happening to one company which destroys or causes major damage to its building and subsequent revenue loss if the business shuts down for a time period. For instance, most policies don't cover downed utility power lines off premises and the resulting loss of electrical power forcing a business to shut down. However, Graff mentioned that JLT Services does include on-and-off-premises power interruption in its business owners' package. When a substation goes down and a whole section suffers power outage, there is a standard waiting period, 72 hours, before an adjuster can start figuring business income loss. On the positive side, some package policies cover related expenses, such as, say, a secured storage locker to contain equipment while a building is being repaired or rebuilt. The lesson: Know your policy and what it covers. What else can a business owner do to get his business quickly up and running again after a disaster? Have a solid catastrophe management plan in place--don't rely 100 percent on your insurance to get you speedily back in business, said Graff. Some claims are complicated to adjust and resolve, plus widespread disasters can simply inundate insurance companies, slowing the claims adjustment and payment processes. If you feel your claim is not being taken care of promptly enough, call your agent and/or your broker. "The insured always has the option to report these claims directly and to deal directly with their agent's broker," Graff said. "If you don't communicate with us and let us know that there is a problem, we can't help you." Sometimes the problem perceived by the insured revolves around needed documentation. "We need copies of your receipts, proof of loss, and similar information--this is standard procedure," Graff noted. Schmidt added, "It is very important to have a dialog with your broker and to listen to what he is telling you; he's not asking you to fill out forms just for the sake of paperwork." Back up your computer business data, Michalenok urged. "Keep a copy of your computer business management system and data off premises, so that if a disaster occurs, you can pop the program into a new computer, and there you go. You may have lost a day, a week, a couple of weeks, but at least you have a fairly accurate snapshot of what has been going on with your business. That's probably the best advice that we could give anybody." What about the Future? What do the past couple of years of disasters, including the record-breaking 2005 hurricane season, mean for insurance companies and their clients? "JLT is taking a proactive role as we try to bring additional risk management opportunities," said Graff. "One aspect emerging from the hurricane season is there will be more choice. Insuring companies will examine accounts more thoroughly than perhaps they did in the past, but that is a good thing, since accounts that before would probably not be renewed will receive some deductible options." At press time, insurance companies had been renegotiating contracts with their own insurance companies, called "reinsurance," discussing terms for the next 12 months, effective January 2006. "Most reinsurance contracts renew at the first of the year," Michalenok explained. Factors include policy language, accounts in coastal states, and other factors. Insurers are looking at the possibility put forth by some meteorologists that the country may be in a several-year cycle of increased major storms. Michalenok noted that when Hurricane Andrew ripped through Florida in 1992, it put about ten regional insurance companies out of business. At this point, though, they are not expecting big rate increases, according to both Graff and Michalenok. However, depending on if they are located within a high-risk area for certain types of major damage, companies may need to obtain separate policies in the future for such hazards as wind damage, hail damage, and even mold, as well as the customary separate flood and earthquake policies, Graff noted. Prepare Now The lack of preparation in the face of an unprecedented hurricane season, especially Katrina, has served as a wake-up call for business owners, as well as the general population. Resulting has been a proliferation of sound advice on how to best prepare your business for possible catastrophe. Now it's up to individual business owners to start implementing plans that best work for them--before disaster strikes.

Getting O&P Companies Up and Running after Katrina: Why Does the Insurance Response Seem So Slow?

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Getting O&P Companies Up and Running after Katrina: Why Does the Insurance Response Seem So Slow?

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FOR SALE: PROSTHETIC AND ORTHOTIC LABORATORY AND FABRICATION EQUIPMENT, TOOLS AND FITTING ROOM ACCESSORIES:

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Texas Board–Eligible Prosthetist or Licensed Prosthetic Assistant

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